PMC Reports Fourth Quarter and Full Year 2014 Results

A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The Company believes that the additional non-GAAP measures are useful to investors for the purpose of financial analysis. Management uses these measures internally to evaluate the Company's in-period operating performance before gains, losses and other charges that are considered by management to be outside of the Company's core operating results. In addition, the measures are used for planning and forecasting of the Company's future periods. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different non-GAAP measures and presentation of results.

PMC-Sierra, Inc.
Adjustments to GAAP Cost of Revenues, Gross Profit, Gross Profit Percentage, Research and Development Expense,
Selling, General and Administrative Expense, Amortization of Purchased Intangible Assets,
Other Income, Provision for Income Taxes, Operating Expenses, Operating Income (Loss),
Net Income (Loss), and Basic and Diluted Net Income (Loss) Per Share
(in thousands, except for per share amounts)
(unaudited)
       
Three Months Ended Twelve Months Ended
December 27, September 27, December 28, December 27, December 28,
 

2014 (1)

 

 

2014 (2)

 

 

2013 (3)

 

 

2014 (4)

 

 

2013 (5)

 

                       
 
GAAP cost of revenues $ 40,702 $ 40,306 $ 37,349 $ 155,396 $ 149,213
Stock-based compensation (285 ) (226 ) (256 ) (966 ) (899 )
Acquisition-related costs - - (5 ) - (800 )
Termination and separation (costs) recoveries - - (171 ) 9 (171 )
Reversal of accruals   -     -     -     -     2,300  
Non-GAAP cost of revenues $ 40,417   $ 40,080   $ 36,917   $ 154,439   $ 149,643  
 
GAAP gross profit $ 96,149 $ 95,156 $ 89,523 $ 370,207 $ 358,815
Stock-based compensation 285 226 256 966 899
Acquisition-related costs - - 5 - 800
Termination and separation costs (recoveries) - - 171 (9 ) 171
Reversal of accruals   -     -     -     -     (2,300 )
Non-GAAP gross profit $ 96,434   $ 95,382   $ 89,955   $ 371,164   $ 358,385  
 
Non-GAAP gross profit % 70 % 70 % 71 % 71 % 71 %
 
GAAP research and development expense $ 50,942 $ 48,441 $ 54,009 $ 198,919 $ 211,047
Stock-based compensation (2,880 ) (1,990 ) (2,854 ) (9,420 ) (11,095 )
Acquisition-related costs (423 ) (356 ) (1,071 ) (2,373 ) (2,812 )
Termination and separation recoveries (costs) 8 28 (2,690 ) (248 ) (4,138 )
Reversal of accruals 342 - - 342 2,890
Lease exit recoveries 29 - - 29 -
Asset impairment   -     -     (508 )   -     (508 )
Non-GAAP research and development expense $ 48,018   $ 46,123   $ 46,886   $ 187,249   $ 195,384  
 
GAAP selling, general and administrative expense $ 29,411 $ 29,265 $ 27,768 $ 117,007 $ 112,770
Stock-based compensation (3,682 ) (3,012 ) (3,694 ) (12,795 ) (14,271 )
Acquisition-related costs (261 ) (669 ) (39 ) (994 ) (1,122 )
Lease exit costs (5 ) (31 ) (48 ) (182 ) (48 )
Termination and separation (costs) recoveries (645 ) 254 (1,282 ) (1,689 ) (1,784 )
Reversal of accruals - - 1,300 - 1,300
Asset impairment - - (639 ) (477 ) (2,214 )
Other nonrecurring expenses   -     -     -     (58 )   -  
Non-GAAP selling, general and administrative expense $ 24,818   $ 25,807   $ 23,366   $ 100,812   $ 94,631  
 
GAAP amortization of purchased intangible assets $ 10,994 $ 9,948 $ 13,547 $ 43,219 $ 48,245
Amortization of purchased intangible assets   (10,994 )   (9,948 )   (13,547 )   (43,219 )   (48,245 )
Non-GAAP amortization of purchased intangible assets $ -   $ -   $ -   $ -   $ -  
 
GAAP other income $ 2,535 $ 1,058 $ 2,499 $ 3,432 $ 6,749
Foreign exchange gain on foreign tax liabilities (2,665 ) (1,081 ) (2,564 ) (3,649 ) (4,697 )
Gain on disposal of investments (26 ) - - (26 ) (1,762 )
Amortization of discount on long-term obligations   350     -     -     350     -  
Non-GAAP other income (expense) $ 194   $ (23 ) $ (65 ) $ 107   $ 290  
 
GAAP provision for income taxes $ 5,007 $ 3,087 $ 12,377 $ 14,412 $ 25,756
Provision for income tax matters   (3,900 )   (2,178 )   (11,760 )   (10,739 )   (25,396 )
Non-GAAP provision for income taxes $ 1,107   $ 909   $ 617   $ 3,673   $ 360  
 
GAAP operating expenses $ 91,347 $ 87,654 $ 95,324 $ 359,145 $ 372,062
Stock-based compensation (6,562 ) (5,002 ) (6,548 ) (22,215 ) (25,366 )
Acquisition-related costs (684 ) (1,025 ) (1,110 ) (3,367 ) (3,934 )
Asset impairment - - (1,147 ) (477 ) (2,722 )
Lease exit recoveries (costs) 24 (31 ) (48 ) (153 ) (48 )
Termination and separation (costs) recoveries (637 ) 282 (3,972 ) (1,937 ) (5,922 )
Reversal of accruals 342 - 1,300 342 4,190
Amortization of purchased intangible assets (10,994 ) (9,948 ) (13,547 ) (43,219 ) (48,245 )
Other nonrecurring expenses   -     -     -     (58 )   -  
Non-GAAP operating expenses $ 72,836   $ 71,930   $ 70,252   $ 288,061   $ 290,015  
 
GAAP operating income (loss) $ 4,802 $ 7,502 $ (5,801 ) $ 11,062 $ (13,247 )
Stock-based compensation 6,847 5,228 6,804 23,181 26,265
Acquisition-related costs 684 1,025 1,115 3,367 4,734
Asset impairment - - 1,147 477 2,722
Reversal of accruals (342 ) - (1,300 ) (342 ) (6,490 )
Lease exit (recoveries) costs (24 ) 31 48 153 48
Termination and separation costs (recoveries) 637 (282 ) 4,143 1,928 6,093
Amortization of purchased intangible assets 10,994 9,948 13,547 43,219 48,245
Other nonrecurring expenses   -     -     -     58     -  
Non-GAAP operating income $ 23,598   $ 23,452   $ 19,703   $ 83,103   $ 68,370  
 
Non-GAAP operating margin 17 % 17 % 16 % 16 % 13 %
 
 
Three Months Ended Twelve Months Ended
December 27, September 27, December 28, December 27, December 28,
     

2014 (1)

 

 

2014 (2)

 

 

2013 (3)

 

 

2014 (4)

 

 

2013 (5)

 

 
GAAP net income (loss) $ 2,330 $ 5,473 $ (15,679 ) $ 82 $ (32,254 )
Stock-based compensation 6,847 5,228 6,804 23,181 26,265
Acquisition-related costs 684 1,025 1,115 3,367 4,734
Termination and separation costs (recoveries) 637 (282 ) 4,143 1,928 6,093
Asset impairment - - 1,147 477 2,722
Reversal of accruals (342 ) - (1,300 ) (342 ) (6,490 )
Lease exit (recoveries) costs (24 ) 31 48 153 48
Amortization of purchased intangible assets 10,994 9,948 13,547 43,219 48,245
Foreign exchange gain on foreign tax liabilities (2,665 ) (1,081 ) (2,564 ) (3,649 ) (4,697 )
Gain on disposal of investments (26 ) - - (26 ) (1,762 )
Amortization of discount on long-term obligation 350 - - 350 -
Other nonrecurring expenses - - - 58 -
Provision for income tax matters   3,900     2,178     11,760     10,739     25,396  
Non-GAAP net income $ 22,685   $ 22,520   $ 19,021   $ 79,537   $ 68,300  
 
Non-GAAP net income per share - basic $ 0.11 $ 0.11 $ 0.09 $ 0.40 $ 0.33
Non-GAAP net income per share - diluted $ 0.11 $ 0.11 $ 0.09 $ 0.40 $ 0.33
 
 
Shares used to calculate non-GAAP net income per share - basic 198,625 197,613 201,615 196,885 203,882
Shares used to calculate non-GAAP net income per share - diluted 201,935 200,744 203,047 200,145 205,841
 

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